MDA DataQuick reported yesterday that there were 1,101 foreclosures last month, down 8 percent from August and 49 percent from September 2008. Notices of default, the first step in the foreclosure process, numbered 2,726, up 3 percent from August but more than double the level of a year earlier, when new regulations temporarily delayed default actions.

Analysts read the latest numbers as a sign that distress continues at near record levels, even as lenders try to recast mortgages where possible.

“There's a batch of truly nasty loans that were made in mid-2006,” DataQuick President John Walsh said. “There's another batch made in late 2006. These are worse than the month before and after, and it's taking a long time to process them.”

DataQuick analyst Andrew LePage said that both statewide and in San Diego, the center of distress is moving from low-cost, subprime loans for inland locations to higher-cost, prime loans for coastal properties.

“That's where the growth is,” LePage said. “They were at relatively low levels a year ago but are now seeing big increases. But the numbers are still pretty low.”

For example, six high-priced ZIP code areas reported increases of 36 percent to 140 percent in default notices compared with their average over the past year. But defaults were still unusual — 12 in Del Mar, eight in Coronado, 39 in Encinitas, 21 in Hillcrest, 34 in Carmel Valley and 26 in Mission and Pacific Beach.

“What concerns me is how much distress is stacking up out there that has not entered the foreclosure system at all,” LePage said.

The Mortgage Bankers Association reported in August that mortgage delinquencies were reaching all-time highs, dating back to 1972. The seasonally adjusted delinquency rate stood at 9.2 percent at the end of the second quarter, up 2.8 percentage points from mid-2008. Third-quarter numbers are expected next month.

Dustin Hobbs, spokesman for the California Mortgage Bankers Association, said lenders are not in a “big rush” to start the foreclosure process if they think current incentives will help spur loan modification.

“You, in essence, wait as long as you can before you have to file a notice,” he said.

But Paul Leonard of the Center for Responsible Lending said consumers still complain about lenders and loan servicing companies taking too long to make decisions, losing paperwork and shunting them from one agent to another.

“The capacity of the servicers, both human and technological, is still limited and not sufficient to keep pace with the scope of the problems they're dealing with,” Leonard said.

Chris George, president of CMG Mortgage in San Ramon and secretary of the mortgage bankers group, disagreed.

“As an industry, we're finally getting our sea legs,” George said, conceding that many lenders still are “wrestling” with the workload before them.

Statewide, DataQuick reported third quarter foreclosures at 50,013, up 9.5 percent from the second quarter but down 37.1 percent from year-ago levels. Defaults stood at 111,689, down 10.3 percent from the second quarter and up 18.5 percent from the third quarter of 2008.

SOURCE: Roger Showley, UNION-TRIBUNE 10-19-09